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PEST Analysis Of Nestle: How Politics And Social Culture Affect Its
Growth

PEST Analysis of Nestle: How politics and social

culture affect its growth
 Kiesha Frue Mar 6, 2019
In this PEST analysis of Nestlé, you’ll learn about how the world’s largest food and
beverage company is affected by four prominent macro environmental factors. In each
section, surprising information about the company will be uncovered, including…

 Why Nestlé moved production from Britain to Poland?

 What caused a massive profit increase the last year?
 Why people are boycotting the company over controversial news?
All of this is part of the PEST framework. Using it, the goal is to understand how politics,
the economy, social culture, and technology impact a company’s growth and success. It’s
easy for you to understand and just as simple for you to do yourself.
Following this framework, let’s get started and learn more about Nestlé, the second-
largest Swiss company in the world.

Also read: SWOT analysis of Nestle

Political factors: The company’s ability to impact the
government
Since Nestlé operates in more than 190 countries, any shift in regulatory environments
can massively impact operations. Multinational firms like Nestlé have a greater risk of
production bottlenecks because of governmental policies and changes. Basically, the
more countries a business operations in, the greater the chance of policy changes that
may interrupt operations.
For example, the Brexit situation threw a wrench in Nestlé’s plans. The change threatens
the livelihood of production and food workers. Europe is an important market for Nestlé
production and profits. And the instability of Brexit has disrupted the entirety of the UK
food supply chain. The Brexit change has been so catastrophic that Nestlé discussed
replacing production in Newcastle and York to Poland. Since, even now, Brexit is still in
the air, the company doesn’t have faith in the future of the country. For that reasoning,
it’s smarter to move operations out of this volatile landscape.
Although political changes often affect the company, moving operations out of the
country affects the unstable environment for Britain. Losing Nestlé means a loss of over
300 jobs, impacting the already controversial political British climate. Keep in mind, not
many companies can impact political stability, but Nestlé can.
Nestlé also has to abide by the changing of food standards and regulations. Each country
has its own set of regulations. If Nestlé doesn’t abide by them, they’ll be cut off; the
products won’t be purchasable, nor edible, in the eyes of the government.

Many food companies, like Nestlé, are experiencing problems associated with the rising
costs of ingredients. As such, many are decreasing the amount of product they offer. This
is a particular problem for chocolate. People continue to buy chocolate treats at the same
(or even increased) price, without knowing companies are shrinking the amount of
product they get.

Economic factors: A surprising increase of profits after a

slow year
Foreign exchange swings are an economic issue for Nestlé. As a multinational firm, the
company is easily impacted by the sway of foreign-exchange rates and prices. If the
currency weakens, it may lead to profit loss, depending on the location. It could also
result in the reverse — a profit increase. Or cheaper options for the importing or
exporting of goods.
Within the last couple of years, Nestlé has been in an upswing for profit. In fact, in
2018, the company’s profits increased by more than 40 percent. According to the
company, profits changed from $7.6 billion to $10 billion. Much of this success is thanks
to three things: The United States market, the Chinese market, and selling off its
confectionery business.
This is a big difference, considering the company reported less than stellar results from
2017. The company blamed a decrease in consumer demand in the US and Brazil. But at
that time, Nestlé’s CEO Mark Schneider held faith that company profits would increase
in 2018… and boy, was he right!

Social factors: The food is adored, the company… not so

much
The social environment, including the attitudes, buying behaviors, and changing
demographics, all affect a business. What’s truly affected food and beverage
companies like Nestlé is the public’s obsession with healthy eating. People want to
consume less sugar and lower calorie foods.
Nestlé knows this. If it didn’t, the company would be in a world of trouble. Nestlé is
focusing on reducing sugar, salt, and saturated fat in some of its products. This requires
reformulating existing products, but it also opens the door for new versions of classic
foods and drinks Nestlé consumers love.

Although the food is still adored, the company is held less favourably.

Over the last couple of years, Nestlé ran into controversy regarding the extraction and
usage of drinking water. Nestlé takes spring water from the land, leaving nothing or
polluted water behind in its wake. This has affected indigenous Canadian land, and
locations like Flint, Mich.

When the company does pay to take this water, the price is next to nothing. Combine this
with what previous Nestlé CEO Peter Brabeck-Letmathe said about the rights to water
being “extreme”, people have become weary of Nestlé. Some are even boycotting the
company, although this can be difficult since Nestlé owns so many food products.

Technological factors: More ways to increase production

and quantity
Nestlé needs to spend more money on research and development. It has more technology
at its disposal to achieve greater feats in the R&D department; social media, digital
surveys, email marketing, discounts… the list goes on.
It’s much easier to connect with audiences all over the world thanks to evolving
technology. It also means Nestlé has more options to increase production, food quality,
and food availability to consumers.
Some companies are adopting blockchain technology to have full informational access to
products — from development to delivery. This is also an option for Nestlé, as it can
decrease production time. At the moment, it’s still a costly venture, and would need to be
introduced slowly to each of Nestlé’s production lines.
PEST Analysis of Nestle: Conclusion
Nestlé is a massive company with ties to 194 countries. It has the funds and presence to
impact governments. It’s also on a profit upswing, despite the major controversies about
Nestlé’s ownership and views about water rights. The company is in the position to adopt
new technology to learn more about what their consumers want, but if they don’t clean up
their public image, it might be for nothing.
I’ve more examples of products, companies, and countries affected by PEST (as well as
legal and environmental issues – included in a PESTLE analysis) too.
Photo by Thibault Penin on Unsplash

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About The Author

Kiesha Frue
Kiesha Frue is a freelance writer and editor with a love for health, wellness, and
entrepreneurship. When she’s not researching into the sunrise, her nose is stuck in the
latest (and cheesiest) of fantasy novels.
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